EU gambling firms hint at possible WTO case against the USA

18 September 2008

It looks as though gambling firms within the European Union are ready to take the USA to task over the American Governments total disregard for international trading laws. Yesterday, a European industry group hinted at the possibility of filing a dispute with the WTO (World Trade Organization).

While EU officials were in Washington to delve into U.S. Justice Department enforcement actions. Lode Van Den Hende, outside counsel for the Remote Gambling Association, told to reporters:

“It looks very much as if this matter will … be sent to the WTO at the end of the commission’s investigation.”

The WTO litigation system is a very long, drawn out process and could take years, but this move would open the doors to possible European sanctions on the United States.

One EU trade official who preferred not to have his identity revealed that he believed the European Commission would come to a decision within the next few months on whether they should present a case to the WTO.

On Tuesday, the EU team got together with members of the Justice Department, U.S. Trade Representative’s office, and other involved U.S. agencies. In November, they will post a publicly available report on their recommendations.

Billions of Euros were wiped off the value of European Internet gambling companies overnight. Many people will be familiar with the UIGEA (Unlawful Internet Gambling Enforcement Act). This was the bright idea of certain US congressmen. It was set in motion in September 2006 to cripple the US market by blocking banks and other payment processors from making payments to online gambling sites.

Several of the big players in the industry such as the publicly traded PartyGaming and 888 closed their doors to the US market in fear of reprisals. It was more of a shareholder decision to protect them from criminal prosecution.

After studying an industry petition, the European Commission moved forward with their own formal investigation into the possibility that Washington was using their self proclaimed powers, to single out EU companies. The view is that online US companies are allowed to roam freely, building their empires while enforcement actions are being used to restrict online gambling companies, based in the EU.

This is a follow on from a previous dispute when the small Caribbean islands of Antigua and Barbuda. They fought back and challenged the US restrictions on internet gambling. They argued that the restrictions were in violation of Washington’s services market-opening commitments. These commitments were made back in 1994, the Uruguay Round world trade pact.

The US initially denied online gambling services was part of this pact. This argument failed so they changed their tune and announced that they would exercise the right to amend its commitments. This is a very unusual move under WTO rules.

As a result of the modification, the US were required to negotiate a suitable remuneration package with other affected WTO members, this includes the EU. Last year Washington agreed a deal with Brussels but as yet the details of this arrangement hasn’t been made available to the public.

When that deal was made, the US considered the case closed.

Spokesperson for the US Trade Representative’s office, Gretchen Hamel said:

“We conducted negotiations with the EU which resulted in a mutually acceptable agreement last December to facilitate the U.S. amending its (services) schedule to clarify that we do not have WTO obligations with respect to gambling,”

Before the deal was made, the US were still committed to their WTO obligations to allow online gambling. van Den Hende, said the EU are concerned that due to this private deal, the US may line them up for prosecution.

The EU see the US stance on this a very real threat. Chairperson for the House of Representatives Foreign Affairs subcommittee on Europe, Robert Wexler, a Florida Democrat hinted that the US should view the EU’s concerns seriously.

Wexler stated:

“I am increasingly concerned that if these disputes are not able to be resolved, it will likely mean costly retaliatory measures will be taken against U.S. economic interests,” Wexler said in a statement before meeting the EU delegation.

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